Planning for the future of your health care doesn’t stop when you ink your name at the bottom of a Power of Attorney, Living Will, or Do Not Resuscitate. No matter how carefully considered or expertly prepared, these documents aren’t worth much sitting in your desk at home. Each year, all over the country, patients with advance directives receive unwanted treatment from health care professionals who simply could not or would not find the time to track down their patients’ memorialized wishes. Give us a call or stop by to discuss how to lay your own best plans and then make sure they don’t go awry.
The Middle Class Tax Relief Act (the “2010 Tax Relief Act”), signed by President Obama on December 17, 2010 (two weeks before a re-set of the federal estate tax exclusion to $1 million per person) threw the classic use of shelter trusts into turmoil by introducing “portability” into the equation.
Portability of unused transfer tax exemption is completely new, though it has been discussed for years. Legally married couples who are of different genders will not have to divide their estates in order to shelter assets from estate taxes because any unused estate tax, GST exemption and lifetime gift amount of the first-to-die spouse is added to the surviving spouse’s unified exemptions.
For the very wealthy, it provides spectacular opportunities to make gifts, potentially in perpetuity, utilizing various retained interests trusts and estate freeze vehicles.
For people who are simply affluent, though portability may make the division of some married couple’s assets for estate tax planning unnecessary, it spawns a few other considerations:
• It requires the filing of an estate tax return upon the first spouse’s death that is purely informational. The value of the first spouse’s estate is left open on his/her return until the second spouse dies. Upon the survivor’s death, if his/her estate exceeds the exclusion amount existing at that time, then the excess is used to fill up the first-to-die spouse’s exclusion amount (as it existed back then?) before the survivor’s estate is taxed.
• If it turns out that the survivor’s estate is below the exclusion amount, then the legal/accounting fees spent on the first death was a waste of time and money.
• With the estate tax laws constantly changing, is it worth the effort to file a return on the first death that might ultimately not otherwise be necessary?
• It only applies to most recent spouse’s unused credit, so if the survivor remarries, that also renders the first informational return a waste.
• Like all of the provisions of the 2010 Tax Relief Act, it is applicable only for the years 2011 and 2012.
• It does not work for gay and lesbian married couples, as their marriages are not federally recognized. Then again, the unlimited marital deduction does not work for them for the same reason.
How have you planned for your death? Not metaphysically, which is a matter between you and your higher power, but for the realities of this world: financially, as it applies to your money and possessions in ways that directly affect your loved ones who survive you, and spiritually, by the manner in which your legacy can touch countless others. It is a question whose answers many people choose to put off indefinitely, with dreadful results.